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NBFC Business
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1) What is a Non-Banking Financial
Company (NBFC)? |
2) NBFCs are doing functions similar
to banks. What is difference between banks & NBFCs ?
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3) Is it necessary that every NBFC
should be registered with RBI? |
4) What are the different types
of NBFCs registered with RBI?
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5) W Updated on February 10, 2009
What are the requirements / is the procedure for registration with RBI? |
1) What
is a Non-Banking Financial Company (NBFC)?
A Non-Banking Financial Company (NBFC) is a company registered
under the Companies Act, 1956 and is engaged in the business of loans and advances,
acquisition of shares/stock/bonds/debentures/securities issued by Government or
local authority or other securities of like marketable nature, leasing, hire-purchase,
insurance business, chit business but does not include any institution whose principal
business is that of agriculture activity, industrial activity, sale/purchase/construction
of immovable property. A non-banking institution which is a company and which has
its principal business of receiving deposits under any scheme or arrangement or
any other manner, or lending in any manner is also a non-banking financial company
(Residuary non-banking company).
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2)NBFCs are doing functions
similar to banks. What is difference between banks & NBFCs ?
NBFCs are doing functions akin
to that of banks; however there are a few differences: (i) an NBFC cannot accept
demand deposits; (ii) an NBFC is not a part of the payment and settlement system
and as such an NBFC cannot issue cheques drawn on itself; and (iii) deposit insurance
facility of Deposit Insurance and Credit Guarantee Corporation is not available
for NBFC depositors unlike in case of banks.
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3)Is it necessary that every
NBFC should be registered with RBI?
In terms of Section 45-IA of the
RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to
commence or carry on any business of non-banking financial institution as defined
in clause (a) of Section 45 I of the RBI Act, 1934. However, to obviate dual regulation,
certain categories of NBFCs which are regulated by other regulators are exempted
from the requirement of registration with RBI viz. Venture Capital Fund/Merchant
Banking companies/Stock broking companies registered with SEBI, Insurance Company
holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified
under Section 620A of the Companies Act, 1956, Chit companies as defined in clause
(b) of Section 2 of the Chit Funds Act, 1982 or Housing Finance Companies regulated
by National Housing Bank.
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4) What are the different types
of NBFCs registered with RBI?
Originally, NBFCs registered with
RBI were classified as: (i) equipment leasing company; (ii) hire-purchase company;
(iii) loan company; (iv) investment company. However, with effect from December
6, 2006 the above NBFCs registered with RBI have been reclassified as (i) Asset
Finance Company (AFC) (ii) Investment Company (IC) (iii) Loan Company (LC) AFC would
be defined as any company which is a financial institution carrying on as its principal
business the financing of physical assets supporting productive/economic activity,
such as automobiles, tractors, lathe machines, generator sets, earth moving and
material handling equipments, moving on own power and general purpose industrial
machines. Principal business for this purpose is defined as aggregate of financing
real/physical assets supporting economic activity and income arising therefrom is
not less than 60% of its total assets and total income respectively. The above type
of companies may be further classified into those accepting deposits or those not
accepting deposits.
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5) Updated on February 10, 2009
What are the requirements / is the procedure for registration with RBI?
A company incorporated under the
Companies Act, 1956 and desirous of commencing business of non-banking financial
institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a
minimum net owned fund of Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999).
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